Rob Frieden

In quick succession the Internet
has evolved from a collaborative project among governments and universities to
a promising commercial medium operated primarily by private ventures. [1]
The Internet’s developing third generation appears poised to exploit
technological innovations, expanding broadband access and converging markets [2]
with even greater service diversity and market segmentation. [3]
This next generation [4]
World Wide Web will not appear as a standard, “one size fits” all medium
primarily because consumers will expect more and different features.For example, on line game players and Voice
over the Internet Protocol (“VoIP”) [5]
users will require “better than best efforts” [6]
routing of bits and presumably will accept the obligation to pay for less
delay, jitter [7]
and dropped packets.Already privacy,
quality of service and other factors support partitioning the Internet into
Intranets and virtual private networks.Similarly content providers can use caching [8]
and premium traffic routing and management service to secure more reliable
service than that available from best efforts routing.

Clearly service diversification can
require many reasonable and lawful types of discrimination between Internet
users notwithstanding a heritage in the first two generations of
nondiscrimination and “best efforts” routing of traffic.Most Internet Service Providers (“ISPs”)
offer access on an unmetered, monthly subscription basis, but some ISPs already
offer different levels of bit delivery speeds.Likewise ISPs increasingly have the ability to examine individual
traffic streams [9]
and prioritize them creating a dichotomy between plain vanilla, best efforts
routing and more expensive, superior traffic management services.

However the potential exists for
carriers operating the major networks used to switch and route bitstreams to go
beyond satisfying diverse consumer requirements.Advocates for the principle of network
neutrality [10]
claim the potential exists for ISPs to engineer a fragmented and “balkanized”
next generation Internet to achieve anticompetitive goals. [11]
The worst case scenario envisioned by network neutrality advocates sees a
reduction in innovation, efficiency, consumer benefits and national
productivity occasioned by a divided Internet: one medium prone to congestion
and declining reliability and one offering superior performance and potential
competitive advantages to users able and willing to pay, or affiliated with the
ISP operating the bitstream transmission network. [12]
Opponents of network neutrality mandates scoff at the possibility of the worst
case scenario, and view government intervention as anathema. [13]

This paper will examine the network
neutrality debate with an eye toward refuting and dismissing the many false and
misleading claims and concentrating on the real problems occasioned by the
Internet’s third evolution.The paper
accepts as necessary and proper many types of price and quality of service
discrimination.However the paper
identifies other types of hidden and
harmful discrimination.The paper
concludes with an identification of best practices in “good” discrimination
that should satisfy most network neutrality goals without creating
disincentives that might dissuade ISPs from building the infrastructure needed
for Internet 3.0 services.

I.The Provocation: Broadband Access and
Upstream Carriers Have to Upgrade Their Networks Without Certain Profit

Incumbent
telephone companies, such as Verizon and AT&T, own and operate ISPs having
the largest market share and operating several of the major long haul networks.
[14]
Internet access and long haul data services have become increasingly
significant revenue generators in light of the substantial decline in long
distance voice telephony rates and lost market share for local exchange telephone
service. [15]
The availability of VoIP services offering flat-rated long distance on a
monthly subscription rate, or per call rates for a few pennies a minute, show
how software applications riding on top of a basic transmission link can
devastate an existing business plan that anticipates the continuation of large
profit margins for plain old telephone services. VoIP and wireless services have adversely
impact wireline local exchange revenues as consumers
migrate to a triple play bundle of services from cable television companies
offering local and long distance telephone service and Internet access coupled
with their core video programming services. [16]
To retain subscribers the incumbent telephone companies have created their own
triple play bundles at prices that generate lower margins for the voice
telephony portion of the package deal.

Faced with
declining margins, revenues and profits from previously core services,
incumbent telephone companies have belatedly embraced digital technologies and
broadband services that include Internet access and Internet Protocol
Television (“IPTV”), a facilities-based competitive alternative to cable television.
[17]The incumbents previously refrained from
aggressively investing in these services for a number of reasons including the
view that existing, “legacy” regulations, which mandated access by competitors
to their facilities at below market rates, [18]
created severe disincentives, the necessary technologies and market demand had
not matured, a post dotcom meltdown reluctance to assume greater risk [19]
and perhaps the failure to forecast the speed at which core wireline service
revenues would decline.Now to make up
for lost time the incumbent telephone companies have embraced fiber optic
technology and have rapidly installed it with the expectation that they can
provide a full range of information, communications and entertainment (“ICE”)
services free of pesky, legacy telecommunications service regulations [20]
as well as cable television regulations, including the duty to secure a
separate operating franchise for each municipality served. [21]

Incumbents telephone companies have
achieved great success in convincing the Federal Communications Commission
(“FCC”) and reviewing courts that competitive necessity and declining revenues
alone would not generate sufficient motivation to invest in next generation
facilities and services.The incumbents
succeeded in creating the assumption that substantial deregulation had to occur,
e.g., elimination of the duty to unbundled network access and price elements at
low rates, [22]
before the incumbents would consider it fiscally prudent to invest in broadband
access and IPTV.In the space of a few
years the incumbents succeeded in convincing courts and the FCC of the need to
dismantle mandatory facilities interconnection and service pricing requirements
contained in the Telecommunications Act of 1996 [23]
that Congress had deemed necessary to jump start local exchange competition. [24]
Incumbent telephone companies also succeeded in having the FCC reclassify, [25]
or newly classify [26]
most Internet-

based services, including basic access to the Internet, as
information services [27]
not subject [28]
to traditional, common carrier regulation under Title II [29]
of the Communications Act, as

Having persuaded the FCC that
Internet-based services do not constitute telecommunications services, [31]
the incumbent carriers now face a different quandary: the standard operating
procedures under which ISPs interconnect networks [32]
prevent incumbent carriers from directly charging all consumers of their
networks despite an ongoing need to invest more funds in ever increasing
bandwidth to meet growing, aggregate demand. ISPs traditionally establish interconnection
terms and conditions based primarily on an assessment of inbound versus
outbound traffic, with additional consideration for such factors as available bandwidth,
number of interconnection locations, diversity of available routes and
availability of person-

nel. [33]
Telephone companies traditionally establish interconnection terms and
conditions that contemplate metering usage and payment for each and every
instance of traffic carriage, regardless of direction, e.g., from or to end
users, or portion of the complete link, e.g., upstream or downstream. [34]

ISPs offer to participate in
traffic routing, both upstream to other ISPs and downstream to end users, based
on the expectation that achieving global Internet access will require the
participation of many interconnected ISPs, many of which having no direct, contractual,
or traffic metering relationship.Conceptualizing the Internet as a “network of networks” [35]
builds in an expectation among carriers that they will cooperate on interconnection
arrangements.When carriers first
established interconnection agreements they refrained from exact route mapping
and traffic metering.The Transmission
Control Protocol used by ISPs determines routing “on the fly” based on current
conditions as opposed to fixed routing used by telephone companies. [36]The
ISPs initially refrained from metering traffic based on the initial expectation
that traffic volumes were roughly equivalent and the cost of metering was not
worth the bother in light of the fact that third parties, such as government
agencies, subsidized operations.

Even now the largest Tier-1 ISPs
agree to make their networks and global network access available on a zero
cost, sender keep all “peering” [37]
basis for other Tier-1 ISPs. [38]Smaller ISPs now must pay for “transiting” [39]
access to larger ISPs’ networks and the access these ISPs have secured to other
ISPs’ networks .In addition to
transiting payments from smaller ISPs, Tier-1 ISPs, affiliated with incumbent
telephone companies, also receive payment from end users that they serve
directly, e.g., through Digital Subscriber Line monthly subscriptions and new
fiber optic residential and business Internet access services.

However, the combined revenues from
these two sources have not satisfied top management officers, for two reasons:
1) proliferating ICE services, such as search engines, online gaming and real
time delivery of video generate ongoing need to upgrade broadband services,
often without a commensurate ability to raise rates; and 2) sources of content
upstream from an incumbenttelephone
company’s ISP network get to satisfy end user demand and have content delivered
downstream to the end user without having to pay the intermediary ISPs that
have participated in the routing and bitstream delivery of the traffic as part
of their transiting and peering agreements with other ISPs.In the first instance the incumbent companies
have found that Internet access services may have become a commodity business,
or at the very least offer lower margins that anticipated.In the second instance the incumbent
companies have identified another potential source of access payments that
heretofore have avoided having to make direct payments to some of the carriers
participating in the link from content source to recipient.

The apparent inability of ISPs to
demand and receive payment from each ISP or ISP customer has frustrated senior
management and motivated them to utter provocative claims that heavy users of
their networks, such as Google, have become free riders:

Now what they
would like to do is use my pipes free, but I ain’t going to let them do that
because we have spent this capital and we have to have a return on it.So there’s going to have to be some mechanism
for these people who use these pipes to pay for the portion they’re using.Why should they be allowed to use my
pipes?The Internet can’t be free in
that sense, because we and the cable companies have made an investment and for
a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free
is nuts! [40]

Incumbent
carriers and like minded opponents to network neutrality have characterized their
opposition to network neutrality in terms of standing firm against government
intrusion, [41]
the imposition of a remedy in search of a problem [42]
and the need to remedy free ridership of ISP networks. [43]Outside the headlines and Congressional
committee hearing rooms [44]
these carriers object to network neutrality on two more practical concerns: 1) it
would foreclose pricing and service initiatives that if successful might
contribute to the bottom line; and 2) it would resurrect some of the regulatory
constraints the carriers thought they had avoided once and for all having won
the right to recharacterize most of their infrastructure as providing largely
unregulated information services.

1)Network Neutrality as a Constraint on
Price Discrimination

Network
neutrality, whether imposed by law or public interest based FCC regulation, can
impose direct restrictions on ISP pricing, but not in the grave and broadly restrictive
manner as

tiering” [45]
that constitutes price and quality of service discrimination on the end user,
demand side.ISPs already offer end
users different subscription rates based of bandwidth and bitrates. Additional
differentiation could involve variable service quality, based on the ability to
handle peak demand bursts as occurs in peer-to-peer networking, video gaming,
delivery of large files and real time streaming of video programming.

Similarly
the concept of network neutrality does not foreclose attempts by incumbent
carriers to reshape access pricing into a conventional two-sided market where
ISPs would demand and receive payments downstream and upstream regardless
whether they serve end users.Under the
current pricing arrangement a two sided market [46]already
exists for ISPs that can collect an Internet access subscription from end users
for DSL and cable modem access to the Internet cloud [47]
and also charge transit fees for small ISPs seeking access to portions of the
Internet cloud these small ISPs cannot reach via their own networks.

Ed Whitacre
has objected to the one sided market scenario where AT&T receives
subscription payments from end users, but no additional payments from content generators
who “use” AT&T networks without making direct payments to AT&T.Nothing about network neutrality forecloses AT&T
from erecting a service so attractive to Google and other heavy users of the
Internet as to entice them to opt for premium carriage of their traffic in lieu
of the shared routes made available through the peering and transit
arrangements secured by the ISPs directly serving these heavy users.For example, Akamai and other network
management firms offer clients enhanced Internet traffic routing and content
delivery by offloading traffic from best efforts routing options and onto
better than best efforts options.Traffic can reach consumers with greater likelihood of on time delivery
and reliability when ISPs and other Internet companies directly manage
particular traffic streams with an eye toward reducing the number of routers
the traffic has to traverse, avoiding circuitous routing and inserting traffic
on the most reliable and least congested networks.

Many universities, along with
corporations, government research agencies, and not-for-profit networking
organizations, have agreed to achieve this type of outcome by underwriting superior
routing through the Internet-2 network, [48]
a series of broadband links not regularly available to non investors.Internet-2 has links to and from the plain
vanilla Internet, but investors have enhanced the likelihood of reliable and
qualitative superior routing by creating a direct or near direct links among
investing organizations.The corporate
equivalent to this better than best efforts complete link from content source
to consumer are virtual private networks and Intranets that carve out a small
portion of the overall infrastructure used to provide Internet
telecommunications.

Nothing
would foreclose AT&T and other incumbent carriers from engineering a
superior and complete Internet routing arrangement using the carrier’s own
facilities, or those of other carriers with which AT&T negotiated a special
traffic management and routing

agreement. [49]
Network neutrality only would foreclose AT&T from punishing Internet users
who have declined the managed service option with less than best efforts
routing, i.e., deliberately dropping packets, creating artificial network
congestion, violating Service Level

Agreements [50]and
otherwise deteriorating the quality of service provided by network links that
AT&T has agreed to make available to other peers and transit customers,
including the ISPs directly serving heavy content providers such as Google.

2)Reimposition of Common Carrier
Responsibilities

The
incumbent carriers make a valid point that elements of network neutrality
impose common carrier regulatory burdens on ISPs that have avoided such burdens,
or have been able to secure a reclassification of services to avoid such
responsibilities.Having avoided this
classification the incumbent carriers imply that common carrier regulation
imposes costly burdens that limit flexibility, stifle innovation and subverts
the opportunity for self-regulation via unfettered marketplace forces.Opponents to network neutrality also consider
enforcement of the antitrust law a sufficient safeguard that could punish abuses
after the fact without the cost and burdens of ex ante regulation.

While
common carrier regulation imposes some degree of constraints that would not
otherwise exist, one should examine closely the nature of common carrier
restrictions that network neutrality would impose.Not all common carriers face the same level of
constraints, and the Telecommunications Act of 1996 provides a method for
selective elimination of common carrier burdens when the public interest
supports such a reduction. [51]
Technically cellular telephone companies still operate under some of the
constraints of common carrier regulation, [52]
but one could hardly say such regulation imposes any significant constraint on
pricing and operational flexibility.Indeed cellular carriers have avoided most common carrier restrictions
including limitations on erecting “walled garden,” preferred access to video
and Internet-based content accessible on the screens of handsets used by
subscribers.

In other
proceedings the FCC has shown that it can and will impose quasi-common carrier
responsibilities on non common carriers if the public interest warrants, or
Congress requires it.The FCC has
required non common carrier, cable and satellite television companies to carry
broadcast television signals as a form of economic and public interest
regulation designed to safeguard the continuing viability of broadcast
television stations. [53]
Recently the FCC has required, non common carrier VoIP service providers to
contribute to universal service funding,[54]
to support enhanced 911 emergency access[55]
and to cooperate with law enforcement officials[56]
in much the same way as common carrier regulated telephone companies.

3)Network Neutrality Requirements as
Confiscatory and a Taking of Property

Opponents
to network neutrality also imply that network neutrality requirements
constitute a “confiscatory” and unlawful “taking” of their property. [57]
Having invested in next generation infrastructure at significant expense both
incumbent telephone and cable television operators expect to have nearly
complete freedom from telecommunications service regulation. However next generation networks will offer a
integrated blend of ICE services, including the functional equivalent of
traditionally regulated, legacy voice telephony and cable television.

The incumbent carriers appear ready
to make two key arguments that equate regulation going forward as confiscatory:
1) robust facilities-based competition obviates the need for regulation,
including common carrier aspects of network neutrality; and 2) commingling and
integrating services that use telecommunications for bitstream transmission
converts all retail offerings into information services.The incumbents have convinced many
legislators and regulators that network neutrality requirements do not make
sense in a competitive environment where the Internet serves as single medium
for convergent ICE services.

a)The TrueCurrentState
of Broadband Competition

Incumbent
carriers, through direct advocacy and advocacy by sponsored researchers,
confidently assert that robust competition already exists both inside the
Internet cloud and at the first and last mile broadband link from residences
and businesses to ISPs.For its part the
FCC has generated glowing endorsements of this assumption based on statistical
compilations, [58]
no doubt influenced by its appreciation for the political and public relations
dividends in compiling positive results.On the other hand other less partisan calculations show the U.S.
significantly behind trailing even other nations, in terms of overall market
penetration, competitiveness and cost, even as compared to nations that have unfavorable
geographical and demographic

The FCC has
deliberately overstated broadband penetration progress by using an overly
generous and unrealistic definition of what qualifies as broadband service [60]
and by using zip codes as the primary geographic unit of measure. [61]Additionally
the FCC includes as competition services lacking any true cross-elasticity with
other services based on substantial price differences.More credible calculations by theInternational Telecommunication Union and the
Organization for Economic Cooperation and Development show the U.S. well behind
many nations both in terms of broadband market penetration, e.g., subscribers
per one hundred inhabitants and expense, e.g., cost per kilobit. [62]

A fair minded assessment of
broadband competition in the United States
shows a mixed bag.It appears that ISP
competition inside the Internet cloud remains robust.Instances where one ISP has threatened to
“de-peer” [63]
with another have not resulted in long term service outages, [64]
nor have any smaller ISPs declared an inability to cobble together all the
transiting agreements needed to access the entire Internet cloud.

However, the
state of competition for first and last mile access to competing ISPs is far
less robust.Even the FCC’s own
statistics acknowledges that incumbent telephone and cable television companies
provide the vast majority of all broadband services. [65]But rather than acknowledge that a duopoly
exists in most parts of the United States, the FCC pads the number of available
broadband services providers in a manner that promotes the inference that widespread
and robust competition exists based on the promise of new technologies, such as
broadband over power lines [66]
and Wi-Max, [67]
the existence of at least one subscriber throughout the geographical area
represented by a zip code and the availability of satellite and terrestrial
wireless options, albeit at prices significantly higher than wireline cable and
DSL options. The Commission uses an
unrealistically low bitrate of 200 kilobits to define broadband service.It makes no distinction between a
facilities-based operator and one that resells the services of the two primary
facilities-based carriers.The
Commission includes operators whose services might be available within a
portion of a wide geographical area defined by zip codes.Additionally the Commission includes
broadband services, such as that offered by satellite and terrestrial wireless
operators, that offer comparatively slower services as far higher prices
thereby making these options unlikely competitors with limited attractiveness for
users in fixed location having cheaper options available, e.g., DSL and cable
modem service.

b)The Information Service Classification
“SafeHarbor”

The
incumbent telephone companies led the successful campaign to have the FCC deem
as information services the broadband first and last mile links to the Internet
cloud, viz. DSL and cable modem access.Having classified Internet access as an information service, the FCC
will have to resort to clever and probably unsustainable semantic maneuvering
to classify as a telecommunications service any software application, riding on
top [68]of
the information service classified bitstream transmission functionality.[69]
If this scenario plays out the FCC would have to extend its information service
classification to other services made available to end users on a retail basis
via information service classified DSL and cable modem links, including VoIP
and IPTV.These services compete with
and constitute the functional equivalent of legacy services

heretofore subject to regulation, common carriage
telecommunications service regulation for voice telephony and cable television
regulation.If the information service
classification extends vertically up to software applications, then the FCC
will have created a deregulated safe harbor for just about any ICE service carried
via DSL and cable modem links, regardless of its functional equivalency with
legacy, regulated services.

The FCC
already has begun to realize the quandary it has created for itself by
fashioning such an elastic and expanding safe harbor.Now bereft of Title II jurisdiction, the
Commission has resorted to Title I of the Communications Act, as amended, to
retain an “ancillary” regulatory hook if and when necessary.The Commission already has applied this
exception to the information service regulatory safe harbor by requiring VoIP
service providers to contribute to universal telephone service funding, to make
available emergency 911 access available and to cooperate with law enforcement
officials.The Commission has
rationalized its imposition of quasi-common carrier, telecommunications service
regulation by invoking broad notions of the public interest, by making a
distinction between how different laws define telecommunica-

tions [70]
and by making a questionable differentiation between the use of
telecommunications to transport bits corresponding to an information service
and the use of telecommunications to transport bits corresponding to retail
telecommunications services. [71]

The FCC may yet again face close
judicial scrutiny and reversal for creating a regulatory safe harbor only to
chip away at it.First, the Commission
may overly stretch its general public interest mandate under Title I of the
Communications Act.Second, the
Commission may not persuade reviewing courts that ancillary jurisdiction, under
Title I, as opposed to conventional telecommunications service jurisdiction,
under Title II, should apply to VoIP, particularly in light of the Commission’s
selective imposition of telephone company regulations on VoIP service providers.Third, the Commission’s telecommunications
versus telecommunications service distinction, may not pass muster with
reviewing courts in light of the fact that telecommunications bitstream
delivery occurs in the very same way for both telecommunications services and
information services. [72]

B.Calibrating
Carrier Rights and Responsibilities

Common carriers historically incur
both responsibilities and special opportunities, e.g., rights of way access to
federal, state, municipal and private property for little if any payment. [73]
So too have the telephone and cable television companies that now complain that
regulation confiscates their property.It comes across as disingenuous for both
telephone and cable television companies to rationalize the right to extend
legacy privileges, acquired during their regulated years, to convergent ICE
services, many or all of which appear to qualify for the information service
safe harbor.

Currently cable television operators
and telephone companies can leverage preexisting rights or way or secure new
rights of way based on their former, or existing, but possibly now temporary, regulated
status.There appears to be no
distinction in terms of the scope of rights of way access available to carriers
operating in their legacy, regulated mode and the very same carriers providing
a larger array of services, some or all of which falling outside legacy
regulators’ jurisdiction. [74]
For example, cable television operators regularly install equipment, including
large above ground pedestals, without any payment to the property owner, so
that the operators can offer triple play services regardless of whether the
land owner wants these new services and without regard to the limited scope of
services the carrier first offered as the basis for securing the rights of way
initially.Similarly telephone companies
continue to install new or replacement lines on private property without having
to pay land owners, based on preexisting rights of way granted to the companies
in their capacity telecommunications service providers.

For so long as incumbent carriers
continue to exploit the privileges conferred upon them in their capacity as
regulated operators, these carriers should continue to accept limited
quasi-common carrier responsibilities.For example, the broadcast television channel “must carry” obligations
of cable television operators do not evaporate simply because telephone
companies may offer competing video program delivery services, or that cable
television operators now can use existing copper, a blend of copper and fiber
optics cables, or a completely fiber optic medium to provide both cable television
video programming, IPTV, telephony, Internet access and other
telecommunications or information services.Likewise, the responsibilities applied to incumbent telephone companies operating the
only telecommunication wire into homes did not evaporate simply because a
second wire became available, or the fact that the telephone company now can
use existing or new media to provide telecommunications and information
services.

II.The
Response: Established Ground Rules Plus Enforcement

Network
neutrality advocates have both well placed apprehension and a misguided sense
of what ISPs owe the public and their customers. ISPs do not operate in a transparent and fully
competitive marketplace in light of nondisclosure agreements that shield
interconnection agreements from scrutiny and still limited broadband competition
at enduser premises.Absent transparency
and competition, network neutrality advocates have every reason to suspect large
ISPs of leveraging their Tier-1 status to favor affiliates and preferred
content suppliers, to punish unaffiliated content suppliers that have rejected
premium service and to block, degrade or generate artificial congestion for
non-premium routing services.Users of ISP
bitstream transmission and routing services cannot readily determine whether
any particular ISP has acted on its incentives to tilt the competitive playing
field and to play favorites, primarily because any complete end-to-end routing
involves several ISPs and delays for any particular segment may result from a
number of legitimate factors.

A.Justified Apprehension

Network neutrality advocates
primarily have only anecdotal information of intentional efforts to delay,
block and drop packets.[75]The FCC has intervened in only one instance
involving a telephone company’s refusal to terminate VoIP traffic. [76]
The Commission secured an agreement by Madison River Communications to resume
the proper delivery of such traffic, in light of the company’s status as a
telecommunications service provider legally obligated to perform traditional
common carrier duties.Had Madison River
Communications operated as an ISP providing Internet access, the FCC might not
have responded in a timely manner, if at all, based on the view that the
Commission lacked jurisdiction to compel ISPs to interconnect with anyone.

ISPs’ incentive and apparent desire
to differentiate service, the costly and widespread opposition to network
neutrality and the provocative assertions of incumbent carrier senior managers
point to a keen interest in pursuing network tiering.The often cited Madison River
case may offer little evidence that Internet content and service providers
regularly risk unfair price and quality of service discrimination, or worst yet
absolute blockage.However it does support
apprehension that an enforcement mechanism does not exist when an ISP and not a
telephone company common carrier engages in unreasonable discrimination, or
absolute blockage.The FCC could threaten
an investigation with the prospect of enforcement sanction only because the
offending traffic blocker had an affirmative duty to accept traffic and deliver
it to the final destination.

ISPs as non common carriers, not
subject to Title II of the Communications Act have no absolute obligation to
accept and deliver VoIP traffic. Indeed
ISPs have every incentive to favor their own VoIP service, or to block any VoIP
traffic to enhance the likelihood that telephony traffic will trigger higher
termination charges as has traditionally been the case when local exchange
carriers originate and terminate voice traffic. [77]
In other words an ISP receiving VoIP traffic has every incentive to act in the
very same manner as the Madison River telephone
company.Should an ISP block VoIP
traffic the FCC would not have Title II as an ironclad legal basis for
mandating interconnection.Instead the FCC
could defer to an ISP’s decision whether to accept VoIP traffic, or the
Commission might invoke its general Title I jurisdiction to mandate
interconnection on public interest grounds.

Until such time as the first and
last mile of broadband access becomes robustly competitive customers will have
as few as one or two carriers available for broadband access to the Internet
and VoIP service providers.Under these
conditions a decision by DSL and cable modem service providers to block VoIP
traffic, or to degrade the traffic of unaffiliated or non-preferred VoIP
service providers would have an immediate, identifiable and adverse impact on
the public interest.Under such
circumstances the FCC should act, because the failure to do so would frustrate
the Commission legislative mandate to promote ubiquitous access to “advanced telecommunications
capability.”[78]Additionally the failure to act probably
would motivate some state regulatory agencies to intervene with possibly
divergent remedies.More broadly the
Commission would face clear evidence of market failure, bottleneck abuse and
price squeezing behavior that it presumed could not occur in the competitive
marketplace it assumed to exist.

The VoIP market will have displayed
market failure characteristics if VoIP service providers cannot readily offer
services to any DSL and cable modem subscriber, and deliver traffic to any
telephone service subscriber whether connected via DSL, cable modems or
conventional telephone lines.Bottleneck
abuse would occur if DSL and cable modem service providers, lacking true,
facilities-based competition, refuse to accept and deliver VoIP traffic, or do
so only if VoIP service providers pay a higher and discriminatory charge for
the origination or termination [79]
of traffic on the DSL or cable modem carrier’s network.The higher charge applicable only to
unaffiliated VoIP service providers exemplifies a classic price squeeze where a
competitor of the ISP incurs a higher charge for an essential service element
than the ISP charges to affiliates and favored VoIP service providers.

B. Unjustified
Apprehension

Network neutrality advocates fear
that the next generation Internet will contain so much bias and preferential
treatment as to jeopardize the fundamental end-to-end connectivity that has
contributed to success.This “curtains
for the Internet” perspective overstates the potential harm from network
tiering, even unlawful, anticompetitive practices, for several reasons.ISPs may want to squeeze out additional
revenues and may resort to heavy handed, extortionate tactics, but surely they
would stop when such strategies make the ISP’s network performance inferior vis
a via other available alternatives, if such competition existed.Absent collusion or consciously parallel
conduct among DSL and cable modem carriers, should one ISP overshoot the mark
on network tiering, customers could migrate to the less biased carrier.Put another way if AT&T deliberately dropped
or delayed delivery of Google packets, some customers might migrate to the
faster delivery options paid for by MSN or Yahoo, but other customers might
abandon AT&T in light of it shoddy performance.

While it may provide difficult to
detect and prove the “smoking gun” of deliberate packet dropping and other
anticompetitive tactics, after the fact forensic examination may provide the
basis for remedies as was the case when Enron employees created artificial
congestion in the electricity delivery grid to run up prices. [80]
Similarly deep pocketed content providers recoiling from what they consider
extortionate rate increases might pursue the option of constructing alternative
broadband access options for consumers such as Google’s support for a city wide
Wi-Fi network in San Francisco. [81]

But even if network neutrality
becomes codified into law or regulation, network neutrality advocates have to
accept that the next generation Internet will contain more bias, options and
service diversification than previously available.Advocates for network neutrality need to
accept that customer and network tiering constitutes a predictable, and not
always lamentable, product of a maturing marketplace.As networks evolve and the technologies used
become more diverse and mature, network operators have available the resources
to recalibrate their pricing structure and to diversify services.

In light of the marketing tactics
used to entice initial subscriptions most Internet users expect access to a lot
of free content, on an all you can eat unmetered basis, [82]
at a low fixed price with delivery speeds progressively increasing without a
higher charge.The Internet’s value
proposition has increased over the years as consumers tap into increasingly
diverse sites, now offering material that requires a network capable of
delivering a broadband bitstream in real time.The power users of the Internet, spammers, gamers, peer-to-peer file
sharers and full motion video watchers have become quasi-free riders in light
of their ability to pay the same price as lower volume users, while forcing
ISPs at both the end user link and farther upstream, to upgrade their networks
while maintaining the same subscription rate.

III.The
Resolution

Legislation
would solve the network neutrality debate by providing principles for which the
FCC would have express legal authority to enforce.In light of the controversy surrounding this
issue, the lack of consensus and well funded policy expressions, Congress may
not remedy the problem in a timely manner. [83]
Absent legislation the stakeholders will have to take affirmative steps on
their own toward resolution.

One step
toward resolution came from AT&T when it made some network neutrality
commitments to secure approval of its merger with BellSouth. [84]
AT&T may have offered concessions with some regret, and the language of its
offer has generated concerns that AT&T has offered less than one might
infer. [85]Additionally FCC Chairman Kevin Martin and
Commissioner Tate issued a joint statement where they reject some of the
concessions as the product of coercion which they believe the FCC should never
enforce. [86]
Nevertheless AT&T has provided a document that, reluctantly perhaps,
acknowledges that network neutrality is a concept that parties can convert into
actual practices and service commitments.

The
AT&T network neutrality commitments contain a time limited agreement to comply
with a previous FCC statement of principles that articulate a baseline code of
conduct for ISPs.In a non-binding,
non-compulsory Policy Statement the FCC articulated four “principles”:

(1) consumers
are entitled to access the lawful Internet content of their choice;

(2) consumers
are entitled to run applications and services of their choice, subject to the
needs of law enforcement;

(3) consumers
are entitled to connect their choice of legal devices that do not harm the
network; and

(4) consumers
are entitled to competition among network providers, application and service
providers, and content providers.[87]

Until AT&T’s 30 month commitment to adopt the FCC’s four
“Network Freedoms,” the Commission had issued a document having no enforceability.

AT&T
also committed to maintain the same number and types of existing peering
agreements and for two years from the closing date of the merger, or the
effective date of any legislation enacted by Congress subsequent to the merger
closing, “to maintain a neutral network and neutral routing in its wireline
broadband Internet access service . . . from the network side of the customer
premise equipment up to and including the InternetExchange Point closest to the customer’s
premise.” [88]
AT&T expressly reserved the right to tier service upstream and exempted its
enterprise managed IP services and IPTV services from any network neutrality
commitment, two loopholes that will grow in significance as AT&T migrates
from copper-based transitional DSL broadband service to fiber optic networks
ostensibly installed primarily to provide IPTV.

Beyond
AT&T’s conditional, time limited and ambiguous commitment, incumbent ISPs
should commit to transparency and full disclosure of network and customer
tiering activities.This means that
Tier-1 ISPs, including those networks owned and operated by AT&T, Verizon
Qwest, and Comcast, should publicly disclose their peering and transiting
policies, as well as offers and acceptances of Service Level Agreements that
deviate from best efforts routing.A
voluntary agreement to disclose might foreclose regulatory intervention by the
FCC, Federal Trade Commission and other agencies, and it would not prevent
better than best efforts service arrangements.Such arrangements could include variable bandwidth and throughput
services to end users, peers and transiting customers, bandwidth partitioning
and service metering.

Additionally
any ISP that serves both end users, whether by resale or facilities it owns and
operates, should commit to a “best practices” collection of service commitments
including the following:

an affirmative obligation
not to drop packets and create congestion when actual traffic conditions do not
necessitate such action;

no retaliation
through targeted degradation in service quality for any network user that has
refused to pay for premium services;

no port blocking
and other refusals to deliver traffic onward to another ISP or the intended
recipient except when such action would violate laws or cause harm to the ISP’s
or other ISPs’ networks;

a commitment to
make available any better than best efforts to any similarly situated customer;

an agreement not
to override firewalls, filters and other traffic management technologies or
services made available to customers or installed by customers, except when
such action would violate laws or cause harm to the ISP’s or other ISPs’
networks; and

no intentional failures
to comply with existing Service Level Agreements executed with end users, peers
and transiting customers.

IV.Conclusion

The network neutrality debate
highlights a particularly contentious time in ICE policy making.Stakeholders appear to have little
inclination to find a middle ground, and decision makers appear to have even
less.Policy making has become
predominated by sponsored research, politics, campaign contrubutions and rhetoric.In light of an apparent disinterest for the
facts it comes as no surprise that the network neutrality debate highlights
opposing perceptions about the impact from changes in the next generation
Internet.Regretably no unbiased fact
finding appears readily available, because politicization at the FCC prevents fair
minded assessment by the Democratic and Republican Commissioners and heretofore
the conflict has not generated a question of law or fact reviewable by a court.

Network neutrality opponents have
overstated the case that competition would remedy any and all instances of
illegal network bias.A fully
self-regulating Internet marketplace does not exist, nor can one confidently
assert that the Internet marketplace would remedy all attempts at unreasonable
network bias.On the other hand the
Internet has not failed to function when network operators and content
providers cut exclusive and preferential deals, or when network providers offer
better than best efforts routing.

For better or worst Internet 3.0
will adopt many of the biased networking characteristics of current vintage
cable television and third generation cellular telephony.Cable television operators enjoy substantial
freedom to cut special content delivery deals, but lawful “must carry”
obligations impose affirmative carriage duties, nothwithstanding cable
operators’ First Amendment speaker rights and non-common carrier status.Commercial mobile radio service providers
retain the common carrier, telecommunications service provider status, yet they
can use new broadband carriage capabilities to deliver a biased, walled garden
access to video and Internet content.

In light of a mixed likely outcome
for Internet 3.0, legislators and regulators should identify what baseline
nondiscrimination requirements an ISP must satisfy, even if it has entered a
safe harbor from Title II telecommunications service regulation.At the risk of stretching Title I, ancillary
regulation, the FCC cannot abdicate Internet 3.0 oversight based on the
currently suspect conclusions that a competitive broadband marketplace exists
everywhere, and the information service classification of Internet access
renders the entire Internet off limits to public interest policy making and
regulation.

The FCC may someday receive
complaints about Internet tiering and service bias involving an ISP as opposed
to a telecommunications service provider such as Madison River
Communications.Dismissing the complaint
for lack of Commission jurisdiction will not make the problem go away, elevate
the effectiveness of antitrust enforcement, or successfully insulate the FCC
from having to consider how alleged violations of network neutrality adversely
affect the nation’s advanced telecommunications capabilities.

The FCC should agree to examine
allegations of network bias and evaluate the complaint from a public interest
template that considers whether discrimination constitutes an unfair trade
practice, or a reasonable attempt at diversifying and proliferating information
services.

[1]For background on how the
Internet evolved from a government underwritten project to a privatized and
commercialized medium, see Rob
Frieden, Revenge of the Bellheads: How
the Netheads Lost Control of the Internet, 26 TELECOM. POL’Y, No. 6, 125-144 (Sep./Oct. 2002); see also, See, Barry M. Leiner, Vinton G. Cerf, David D. Clark, Robert E.
Kahn, Leonard Kleinrock, Daniel C. Lynch, Jon Postel, Larry G. Roberts andStephen Wolff, A Brief History of the Internet, Internet Society; available at: http://www.isoc.org/internet/history/brief.shtml.

[5]Voice over the Internet Protocol
(“VoIP”) refers to the use of the Internet to carry and deliver on a real time,
immediate basis packets of data that correspond to a voice conversation. VoIP
services range in quality, reliability and price and can link both computers
and ordinary telephone handsets.For
technical background on how VoIP works see
Intel, White Paper, IP Telephony Basics,
available at: http://www.intel.com/network/csp/resources/white_papers/4070web.htm;
Susan Spradley and Alan Stoddard,Tutorial on Technical Challenges Associated
with the Evolution to VoIP, Power Point Presentation, available at: http://www.fcc.gov/oet/tutorial/9-22-03_voip-final_slides_only.ppt.See also, Jerry
Ellig and Alastair Walling, Regulatory
Status of VoIP in the Post-Brand X
World, 23 SANTA CLARA COMPUTER & HIGH TECH. L.J. 89 (No. 2006); Amy L.
Leisinger, If It Looks Like a Duck: The
Need for Regulatory Parity in VoIP Telephony, 45 WASHBURN L.J. 585
(Spring, 2006); Mark C. Del Bianco, Voices Past: The Present and
Future of VoIP
Regulation, 14 COMLCON 365 (2006); R. Alex
DuFour, Voice Over Internet Protocol: Ending Uncertainty and Promoting Innovation
Through a Regulatory Framework, 13 COMLCON 471 (2005); Stephen E. Blythe, The
Regulation of Voice-Over-Internet-Protocol in the United States, the European
Union, and the United Kingdom, 5 J. HIGH TECH. L. 161(2005).

[6]“The Internet is a vast network
of individual computers and computer networks that communicate with each other
using the same communications language, Transmission
Control Protocol/Internet Protocol (TCP/IP). The Internet consists of
approximately more than 100 million computers around the world using TCP/IP
protocols. Along with the development of TCP/IP, the open network architecture
of the Internet has the following characteristics or parameters:1. Each
distinct network stands on its own with its own specific environment and user
requirements, notwithstanding the use of TCP/IP to connect to other parts of
the Internet. Communications are not directed in a unilateral fashion. Rather,
communications are routed throughout the Internet on a best
efforts basis in which some packets of information
may go through one series of computer networks and other packets of information
go through a different permutation or combination of computer networks, with
all of these information packets eventually arriving at their intended
destination. 2. Black boxes, for lack of a better term, connect the various
networks; these boxes are called ‘gateways’ and ‘routers.’ The gateways and
routers do not retain information but merely provide access and flow for the
packets being transmitted.3. There is no global control of the Internet.” Konrad L. Trope, Voice Over Internet Protocol: The Revolution in
America’s Telecommunications Infrastructure, 22 COMP. & INTERNET L. 1. No. 12, 1,4 (Dec. 2005).

[7]“When
you browse the Web, for example, you generate little or no traffic while you're
reading a page, but there is a burst of traffic when your browser needs to
fetch a new page from a server. If a network provider is using minimal delay discrimination, and the high-priority traffic is bursty, then
low-priority traffic will usually sail through the network with little delay,
but will experience noticeable delay whenever there is a burst of high-priority
traffic. The technical term for this kind of on-again, off-again delay is ‘jitter.’” Edward W.
Felten,Nuts And Bolts Of Network Neutrality, Practising Law Institute,
24th Annual Institute on Telecommunications Policy & Regulation, 887
PLI/PAT 317, 326 (Dec. 2006).

[8]Cachingrefers to intermediate and
temporary storage of data. “Google makes and analyzes a copy of each Web page
that it finds, and stores the HTML code from those pages in a temporary
repository called a cache.” Field v. Google, Inc., 412 F.Supp.2d 1106 (D. Nev.
2006) (holding that the Digital Millennium Copyright Act (DMCA) provides a
“safe harbor” exemption from liability for making cached copies of copyrighted
works).

[9]“A
packet sniffer (also known as a network analyzer or protocol analyzer or, for
particular types of networks, an Ethernet sniffer or wireless sniffer) is
computer software or computer hardware that can intercept and log traffic passing
over a digital network or part of a network. As data streams travel back and
forth over the network, the sniffer captures each packet and eventually decodes
and analyzes its content according to the appropriate RFC or other
specifications.” Wikipedia, Packet
sniffer; available at: http://en.wikipedia.org/wiki/Packet_sniffer.

[16]“Few doubt that the future of telecommunications will rely mostly on
broadband and wireless technologies. Wireless and broadband technologies are
transforming the telecommunications market, offering users ubiquitous access to
voice, data, and internet services. The number of mobile subscribers has
already surpassed that of end-user switched access lines served by local
exchange carriers.” National Regulatory Research Institute, Methods for
Analyzing the Effects of Broadband and Wireless Services on Competition in
Local Telephony, Project Announcement; available at: http://www.nrri.ohio-state.edu/current-projects/telecommunications/methods-for-analyzing-the-impact-of-broadband-and-wireless-services-on/.

[17]“Rather
than ‘broadcasting’ a constant stream of all available programs, as cable does
and Verizon plans to do, IPTV stores a potentially unlimited
number of programs on a central server, which users then call up on demand. SBC
will not replace the copper lines that currently run into customer premises.
Instead, to make sure there is sufficient bandwidth between the neighborhood
node where the optical fiber terminates and the household premise, it will
upgrade the DSL equipment currently at those nodes and in households with VDSL
technology. At the household, the viewer will use the IP technology to send a
signal to the SBC end-office to send a particular channel or video on demand
selection. That signal will be sent over the same bandwidth
used for data and VoIP service. In SBC's system, a single customer line will
have enough bandwidth to support up to four active television sets per
household at a time, or up to two HDTV channels at a time.” Charles B. Goldfarb,
Telecommunications Act: Competition,

[18]“For almost ten years, the FCC has struggled
with crafting regulations that promote local exchange carrier competition by
requiring incumbent carriers to lease portions of their networks to competitors.[18]Such network element unbundling offers market entrants the opportunity
to provide service and generate competition well before they would have
completed construction of their own facilities.[18]Incumbents have successfully argued that instead of jumpstarting
competition, the FCC’s policies made it possible for market entrants to thrive
without having to risk substantial investment in physical plant.The Commission’s rules permit market entrants
to resell existing facilities and services of incumbent carriers on favorable
terms and conditions.”

[19]See Rob Frieden, Fear and
Loathing in Information and Telecommunications Industries: Reasons for and
Solutions to the Current Financial Meltdown and Regulatory Quagmire, 5 THE INTERNATIONAL
JOURNAL ON MEDIA MANAGEMENT, No. 1, 25-38 (Spring, 2003).

[21]In a controversial attempt to
expedite competitive market entry by wireline telephone companies into the
multi channel video program delivery marketplace the FCC establishes rules that may be
construed as preempting state and municipal franchising authority. Federal
Communications Commission, **order not released

[22]“[P]etitioners
argued before the Commission that mandatory unbundling at Commission-mandated
prices reduces the incentives for innovation and investment in facilities.
Their reasoning, of course, is that a regulated price below true cost will
reduce or eliminate the incentive for an ILEC to invest in innovation (because
it will have to share the rewards with CLECs), and also for a CLEC to innovate
(because it can get the element cheaper as a UNE). Indeed, many prices that seem
to equate to cost have this effect. Some innovations pan out, others do not. If
parties who have not shared the risks are able to come in as equal partners on
the successes, and avoid payment for the losers, the incentive to invest plainly declines.” U.S. Telecom Assn v.
FCC, 290 F.3d 415, 424 (D.C. Cir.
2002)cert.
denied sub nom. WorldCom, Inc. v.
United States Telecom Ass'n, 538 U.S. 940 (2003 Mem.). “Each unbundling of
an element imposes costs of its own, spreading the disincentive to invest in innovation and creating complex issues of managing
shared facilities.” Id. 290 F.3d at 427.

[27]Information service is defined as
“the offering of a capability for generating, acquiring, storing, transforming,
processing, retrieving, utilizing, or making available information via
telecommunications, and includes electronic publishing, but does not include
any use of any such capability for the management, control, or operation of a
telecommunications system or the management of a telecommunications service.” 47
U.S.C. § 153(20).“[T]he language and legislative history of [the
Communications Act of 1996] indicate that the drafters . . . regarded
telecommunications services and information services as mutually exclusive
categories.” Federal-State Joint Board
on Universal Service, Report to Congress, 13 FCC Rcd.11501, 11522 (1998); see also Vonage
Holdings Corp., 290 F. Supp.2d at 994, 1000 (applying the FCC’s dichotomy).

[28]The FCC
retains jurisdiction to regulate information services under Title I of the
Communications Act. 47 U.S.C. §151 et seq.Title I serves as the basis for “ancillary” regulation of services that
have a potentially adverse impact on regulated services.

[30]Common carriers, including
providers of basic telecommunications services, must offer service on a
nondiscriminatory basis, subject to numerous entry
regulations, tariffing, and operating requirements.

[31]Telecommunications
is defined as “the transmission, between or among points specified by the user,
of information of the user’s choosing, without change in the form or content of
the information as sent and received.” 47 U.S.C. § 153(43).Telecommunications service means “the
offering of telecommunications for a fee directly to the public, or to such
classes of users as to be effectively available directly to the public,
regardless of the facilities used.” 47 U.S.C. §
153(46). The Communications Act defines telecommunications carrier as
“any provider of telecommunications services, except that such term does not
include aggregators of telecommunications services (as defined in section
226).A telecommunications carrier shall
be treated as a common carrier under this Act only to the extent that it is
engaged in providing telecommunications services, except that the Commission
shall determine whether the provision of fixed and mobile satellite service
shall be treated as common carriage.” 47 U.S.C. §
153(44).

While information service providers
use telecommunications to transmit bitstreams, the FCC has chosen not to
separate this functionality from the information processing that also
occurs.In other words the FCC considers
telecommunications to be subordinate to and fully integrated with the
predominant information service.

[32]Unlike telecommunications
financial settlements, which typically meter and price each and every network
use, ISPs agree not to meter and price traffic they agree to carry based on the
expectation that their “peer” ISP will carry an equivalent volume of
traffic.Even for instances where one
ISP pays another for carriage, the “transiting” agreement executed between the
two ISPs specifies the bandwidth and bitstream carriage capabilities offered
without typically metering each session of network usage.For more background on ISP peering and
transiting see Rob Frieden, Network
Neutrality or Bias?--Handicapping the Odds for a Tiered and Branded Internet,
__ HASTINGS COM/ENT L.J. ____ (forthcoming, 2007).

[34]For background on the
international accounting rate system, seePaul W. Kenefick, A Step in the Right Direction: The FCC
Provides Regulatory Relief in International Settlements and International
Services Licensing, 8 COMLCON 43 (2000); Rob Frieden, Managing Internet-Driven Change in International Telecommunications,
ch. 9.1 (2001); Robert M. Frieden, Falling
Through the Cracks: International Accounting Rate Reform at the ITU and
WTO, 22 TELECOM POL’Y, 963, 963-75 (1998) (describing how heightened
attention to international calling rates at the ITU and WTO has led some
observers to conclude that carriers soon will impose cost-based termination
charges).Rob Frieden, Robert M., Last Days of the Free Ride?The Consequences of Settlement-Based
Interconnection for the Internet, 1 INFO., No. 3, 225-238 (June,
1999).

[35]“The idea of a computer network intended to allow general communication
between users of various computers has developed through a large number of
stages. The melting pot of developments brought together the network of networks that we know as
the Internet.”

[36]“TCP/IP routes packets anonymously on a
‘first come, first served’ and ‘best efforts’ basis. Thus, it is poorly
suited to applications that are less tolerant of variations in throughput
rates, such as streaming media and VoIP, and is biased against network-based
security features that protect e-commerce and ward off viruses and spam.”
Christopher S. Yoo, Beyond Network
Neutrality, 19 HARV. J.L. & TECH. 1, 8 (Fall, 2005).

[37]Internet
peering refers to a reciprocal traffic routing arrangement whereby one ISP
agrees to accept traffic for onward routing in exchange for a similar routing
commitment by another ISP.Peering
typically involves no settlement or payment of funds as ISPs agree to peer only
if they generate and receive roughly the same volume of traffic.See also, Wikipedia, http://en.wikipedia.org/wiki/Peering.

[38]“Tier 1 networks typically seek to protect their relatively rare status by
preventing new networks from becoming Tier 1's and thus potentially competing.
The networks often accomplish this by setting "peering requirements"
which are intended to be too high for new networks to meet. Some experts in the
field of Internet interconnections have compared the collective behaviors and
motivations of Tier 1 networks to those of a cartel, in that they attempt to
reduce competition in Internet bandwidth pricing through tacit collusion, and
attempt to restrict the admission of new members. When one Tier 1 is perceived
to be "cheating" the cartel by selling transit for too low a price,
or by "dumping" too much outbound heavy bandwidth (which is
significantly easier to deliver for the sending network than the receiving
network), other members may move to de-peer that network.” Wikipedia, Tier1
network, Politics; available at:

[39]Internet
transiting refers to a traffic routing arrangement whereby one ISP agrees to
accept traffic for onward routing for compensation.Transiting involves a settlement and payment
of funds because one ISP requires access to the links, subscribers and content
available via another ISP’s network and its peering arrangements.“Transit is the business relationship whereby
one ISP provides (usually sells) access to all destinations in its routing
table.” William B. Norton, Internet Service Providers and Peering,
Draft 2.5 (undated)

[41]See, e.g., Hands Off the Internet, World Wide Web Site; available
at: http://handsoff.org/blog/. “Hands
Off The Internet is a nationwide coalition of Internet users united together in
the belief that the Net's phenomenal growth over the past decade stems from the
ability of entrepreneurs to expand consumer choices and opportunities without
worrying about government regulation.” http://handsoff.org/hoti_docs/aboutus/.

[42]“Currently there are no
principles of network neutrality encoded into law. So ISPs are already free to
block or favor content as they please. It’s telling that none of them has. In
fact, no proponent of network neutrality can cite an existing problem to which
network neutrality is a solution.” Arpan Sura, The Problem With Network Neutrality, FreedomWorks
World Wide Web Site, (May 2, 2006);
available at: http://www.freedomworks.org/informed/issues_template.php?issue_id=2571;
Other web-based organizations hotly dispute this view: “The constant refrain of
the Astroturf groups like McCurry’s ‘Hands Off the Internet’ is that Network
Neutrality is a solution in search of a problem. They cite the absence of
numerous examples of blocking or degradation to back this argument. This is a
red herring. There are multiple real-world instances of blocking and impairment.”
Save the Internet.com, Big Lie of the
Week: No. 3, undated; available at: http://www.savetheinternet.com/=lie3.

[47]The
Internet cloud refers to the vast array of interconnected networks that make up
the Internet and provider users with seamless connectivity to these networks
and the content available via these networks.

[57]While reviewing courts have questioned
the nature, type and rates of the FCC mandatedcommon carrier interconnection and facilities-leasing requirements, the
judiciary has not deemed the requirements confiscatory: “There is no evidence that the decision to adopt TELRIC
[i.e., compulsory pricing of local exchange service elements on the basis of
quite low Total Element Long Run Incremental Cost] was arbitrary,
opportunistic, or undertaken with a confiscatory purpose. Indeed,
the indications in the record are very much to the contrary.” Verizon
Communications, Inc. v. F.C.C., 535
U.S. 467, 472, 122 S.Ct. 1646, 1652 (2002). F.C.C. v. Florida Power Corp., 480 U.S. 245, 107 S.Ct. 1107 (1987) (rate set by the FCC was not confiscatory and thus did not
amount to an unconstitutional taking).

The International
Telecommunication Union ranked the United States
15th in the world in terms of broadband penetration per 100 inhabitants as of 1 January 2006.International Telecommunication Union, Strategy and
Policy Unit Newslog - ITU Broadband Statistics for 1 January 2006;
available at: http://www.itu.int/osg/spu/newslog/CategoryView,category,Broadband.aspx;
The ITU’s broader benchmarking of the most important indicators for
measuring a nation’s capability to promote information and communications
technologies and the “Information Society” ranked the United States 21st
in the world.International
Telecommunication Union, Digital Opportunity Index (using 2005 statistics);
available at http://www.itu.int/osg/spu/statistics/DOI/index.phtml.

[60]“We use
the term ‘high-speed’ to describe services that provide the subscriber with
transmissions at a speed in excess of 200kilobits per second (kbps) in
at least one direction. ‘Advanced services,’ which provide the subscriber with
transmission speeds in excess of 200 kbps in each direction, are a subset of
high-speed services.” Federal Communications Commission, High-Speed Services for Internet Access:
Status as of June 30, 2006, 1, n.
1[hereinaftrer cited as FCC High Speed Internet Access Statistics].

[61]“The Commission’s data collection program requires
providers to list the Zip Codes in which the provider has at least one
high-speed connection in service to an end user . . ..” High-Speed Services for Internet Access:
Status as of June 30, 2006 at 3. “No
consideration is given to the price, speed or availability of connections
across the ZIP code.” S. Derek Turner, Broadband
Reality Check-The FCC Ignores America’s Digital Divide (2005); available at: http://www.freepress.net/docs/broadband_report.pdf.

[62]“The price of bandwidth in
September 2005 varies greatly across the OECD with prices ranging from USD 0.29
(PPP) per Mbit/s in Japan
to over USD 150 (PPP) from several operators in the OECD. provides Mbit/s
pricing for the 15 lowest-price providers for each technology. It seems that
the level of competition in the market is a much stronger determinant of price
than the underlying technology. Japanese, French and Korean broadband
connections are the least expensive per Mbit/s for cable, ADSL and fibre.”
Organization for Economic Co-Operation and Development, Directorate for
Science, Technology and Industry, Committee for Information, Computer and
Communications Policy, Working Party on Telecommunication and Information
Services Policies, Multiple Play: Pricing
and Policy Trends, DSTI/ICCP/TISP(2005)12/FINAL 24 (April 7, 2006); see Figure 8. Broadband prices per
Mbit/s, top 15 firms, by technology, September 2005, USD/PPP; id. at 24.

“[ISPs in] South
Korea and Japan
. . . routinely offer 100 Mbps connections in both directions, uploading and
downloading, for around $40 per month. But in the United
States, the best connections top out at 1/3
this speed and cost 400% more—and very few places even have access to the new
fiber-optic services being offered.” Bruce Kushnick, Where’s that broadband
fiber-optic access? Nieman Watch Dog, Ask This (March 14, 2006); available at:
http://www.niemanwatchdog.org/index.cfm?fuseaction=ask_this.view&askthisid=186.

[63]De-peering refers to the
discontinuation of a zero cost interconnection agreement typically based on the
determination that traffic flows are not symmetrical.

[65]“Of the 64.6
million total high-speed lines, 44.1% were cable modem, 34.9% were ADSL, 1.5%
were symmetric DSL (SDSL) or traditional wireline, 1.1% were fiber to the end
user premises, and 18.4% used other technologies.” FCC High Speed
Internet Access Statistics at 2. “Of the 50.4
million lines which were faster than 200 kbps in both directions, 55.9%
were

to the end user premises, and
4.5% used other technologies.”Id. at 3. Of the 45.9 million lines serving residential
subscribers, “cable modem represented 59.9% while 35.8% were ADSL, 0.2% were
SDSL or traditional wireline, 1.0% were fiber to the end user premises, and
3.2% used other technologies.” Id. at 3.

[66]“[W]e
find that resolving the narrow classification issues of BPL-enabled Internet access
service immediately will promote the deployment of BPL technology and the
proliferation of this nascent service. Perhaps more
importantly, we find that saddling this service with conditions that do not
apply to other competing forms of broadband Internet access
services would create a regulatory disparity antithetical to our creation of a
level playing field for all modes of this service.” United Power Line Councils
Petition For Declaratory Ruling Regarding the Classification of Broadband Over
Power Line Internet Access Service as an Information Service, WC 06-10,
Memorandum Opinion and Order, FCC 06-165, 2006 WL 3207080 (F.C.C.) (rel. Nov.
7, 2006)(deeming BPL an information service and a competitive alternative to
other wireline Internet access technologies).

[67]“WiMAX (World Interoperability for Microwave Access, Inc.) is a
wireless broadband technology based on the IEEE 802.16 standard, which supports
delivery of last mile wireless broadband access as an alternative to cable and
DSL. WiMAX can support fixed and nomadic, as well as portable and
mobile wireless broadband applications without the need for direct
line-of-sight with a base station.” Consolidated Request of the WCS Coalition
for Limited Waiver of Construction Deadline for 132 WCS Licenses, WT 06-102, DA
06-2461,Order 2006 WL 3491617 (F.C.C), n.56 (rel Dec. 1, 2006); (citingWiMAX Forum White Paper, Third
Plugfest -- Sophia Antipolis at 4 (Mar. 2006).

[68]The FCC uses telecommunications
service and information service definitions to establish regulatory
classifications, without considering the several layers of functionality
involved.For example companies
supplying software, which can be installed for use when initiating an Internet
session, properly avoid FCC regulation.Likewise the FCC can avoid having to regulate the protocols and
standards establishing standard operating procedures for switching, routing and
managing Internet traffic.See, e.g., United States Senate, Committee
on Commerce, Science and Transportation, Prepared Statement of Vinton G. Cerf,
Vice President and Chief Internet Evangelist, Google, Inc. available at: http://commerce.senate.gov/hearings/testimony.cfm?id=1705&wit_id=4958.

“The Internet’s open, neutral architecture has proven to
be an enormous engine for market innovation, economic growth, social discourse
, and the free flow of ideas.The
remarkable success of the Internet can be traced to a few simple network
principles—end-to-end design, layered architecture, and open standards—which
together give consumers choice and control over their online activities.”

[69]While the FCC also exempts
bitstream transmitting carriers from regulation, in light of the information
service classification, the Commission could opt to examine separately the
different layers combined to support the delivery of a service, such as
VoIP.For background on a revised
regulatory regime that applies different degrees of government oversight based
on the scope of competition in each layer of service that blends
telecommunications packet delivery with intelligent networking , software
applications and content see Richard S. Whitt, A Horizontal Leap Forward: Formulating A New
Communications Public Policy Framework Based on the Network Layers Model, 56 FED. COMM. L.J. 587 (May, 2004); Yochai Benkler, From Consumers to Users: Shifting the Deeper
Structures of Regulation Toward Sustainable Commons and User Access, 52
FED. COMM. L.J. 561 (2000); Scott Marcus, The
Potential Relevance to the United States of the European Union’s Newly Adopted
Regulatory Framework for Telecommunications, Federal Communications
Commission, Office of Plans and Policy Working Paper Series No. 36 (July,
2002); available at: http://www.fcc.gov/osp/workingp.html;
Douglas Sicker, Further Defining a
Layered Model for Telecommunications Policy (2002); unpublished paper available
at: http://intel.si.umich.edu/tprc/papers/2002/95/LayeredTelecomPolicy.pdf;
Kevin Werbach, A Layers Model for
Internet Policy, 1 J. TELECOM. & HIGH TECH. L., 37 (2002); John T.
Nakahata, Regulating Information
Platforms: The Challenge of Rewriting Regulation From the Bottom Up, 1 J.
ON TELECOM. & HIGH TECH. L., 95 (2002); Phillip J. Weiser, Law and Information Platforms, J. ON
TELECOM. & HIGH TECH. L., 1 (2002); Craig McTaggert, A Layered Approach to Internet Legal Analysis (Dec. 21, 2002); available at http://www.innovationlaw.org/cm/ilg2002/reading/layered1.pdf;Robert Cannon, The Legacy of the Federal Communications Commission’s Computer
Inquiries, 55 FED. COMM. L.J. 167 (2003); Rob Frieden, Adjusting the Horizontal and Vertical in Telecommunications Regulation:
A Comparison of the Traditional and a New Layered Approach, 55 FED. COMM. L.J.
207 (2003).

[70]Section 102(8)(B)(ii) of the Communications Assistance For Law
Enforcement Act, PL 103-414, 108 Stat 4279 (October 25, 1994), codified at 47 U.S.C. § 1001(8)(B)(ii)
defines a “telecommunications carrier” as “a person or entity engaged in
providing wire or electronic communication switching or transmission service to
the extent that the Commission finds that such service is a replacement for a
substantial portion of the local telephone exchange service and that it is in
the public interest to deem such a person or entity to be a telecommunications
carrier for purposes of this title.” The FCC has interpreted this section as
requiring the Commission “to deem certain service providers to be
telecommunications carriers for CALEA purposes even when
those providers are not telecommunications carriers under the Communications
Act of 1934, as amended.” Communications Assistance for Law Enforcement Act and
Broadband Access and Services,ET Docket No. 04-295, First Report and Order and Further Notice of
Proposed Rulemaking, 20 FCC Rcd. 14989, 14993 (2005).

[71]See Rob Frieden, What Do Pizza Delivery and Information Services
Have in Common? Lessons From Recent Judicial and Regulatory Struggles with
Convergence, 32 RUTGERS COMPUTER AND TECHNOLOGY LAW
JOURNAL, No. 2, 247-296 (2006).

[73]For example, the
Telecommunications Act of 1996, as amended, specified the right of wireless
telecommunications service providers to secure rights of way and tower siting
access to federally owned property.Telecommunications Act of 1996, P.L. 104-104, 110 Stat. 56 (1996), Sec.
734(c) (2006), codified at 47 U.S.C.
§332(c)(7).Generally a
telecommunications service provider can secure nondiscriminatory
access to the poles, ducts, conduits, and rights-of-way
owned or controlled by another telecommunications service provider. 47 U.S.C.
§224.

[74]The Supreme Court has endorsed
this leveraging of access rights.In National Cable & Telecommunications Association, Inc.,
v. Gulf Power Co., 534 U.S. 327, 122 S.Ct. 782 (2002) the Supreme ruled that cable
television companies have the same legal right to access and attach wires to
poles owned and operated by other utilities regardless of which such pole
attachments are used to provide regulated video or unregulated broadband
services.

[75]See, e.g., SavetheInternet.com, How does this threat
to Internet freedom affect you? available at: http://www.savetheinternet.com/=threat (claiming blocked
access by Canadian incumbent telephone company to a Web site sympathetic to the
Telecommunications Workers Union during a contentious labor dispute;
intentional degradation of competing VoIP service by Shaw, a major Canadian
cable, internet, and telephone service company and blocked emails that
mentioned www.dearaol.com -- an advocacy
campaign opposing an attempt by AOL-Time Warner’s to secure payment from e-mail
senders).

[77]The charges imposed by local
exchange carriers for use of their networks to originate and terminate traffic
depend on the nature of the service regardless of whether different services
impose different costs.For example,
local exchange carriers typically charge more to terminate a wireless, cellular
telephone call than a conventional, wireline telephone call even though the
costs of doing so are identical.Traffic
characterized as voice telephony also triggers carrier liability for
contributing to universal service funding.

[78]Section 706 of the
Telecommunications Act created an express mandate for the FCC and state public
utility commissions to “encourage the deployment on a
reasonable and timely basis of advanced telecommunications capability to all
Americans.” 47 U.S.C. §157(a).The Act
defines advanced telecommunications capability “without regard to any
transmission media or technology, as high-speed, switched, broadband telecommunications
capability that enables users to originate and receive high-quality voice,
data, graphics, and video telecommunications using any technology.” 47 U.S.C.
§157(c)(1).

[79]The FCC acknowledges that
different types of carriers pay different rates to originate and terminate
traffic over identical local exchange telephone company facilities. “Existing
intercarrier compensation rules may be categorized as follows: access charge
rules, which govern the payments that interexchange carriers (“IXCs”) and
CMRS carriers make to LECs to originate and terminate long-distance calls. . .
. The access charge rules can be further broken down into interstate
access charge rules that are set by this Commission, and intrastate
access charge rules that are set by state public utility commissions. Both the
interstate and intrastate access charge rules establish charges that IXCs must
pay to LECs when the LEC originates or terminates a call for an IXC, or
transports a call to, or from, the IXC's point of presence (“POP”). CMRS
carriers also pay access charges to LECs for CMRS-to-LEC traffic that is not
considered local and hence not covered by the reciprocal compensation rules.
Other customers carrying traffic to or from points within an exchange area to
points outside the exchange area may also pay access charges to the LEC. These
access charges may have different rate structures- i.e., they may be
flat-rated or traffic-sensitive. In general, where a long-distance call passes
through a LEC circuit switch, a per-minute charge is
assessed. In order to keep local telephone rates low, access charges have
traditionally exceeded the forward-looking economic costs of providing access.”
Developing a Unified Intercarrier Compensation Regime, 16 FCC Rcd. 9610, 9611
(2001); Further Notice of Proposed Rulemaking, 20 FCC Rcd. 4685 (2005).

[80]“[I]n Load Shift, Enron traders submitted false energy
schedules and bids to the California market to create the appearance of
congestion on a transmission line. This would trigger payments attached to
easing congestion and let Enron
profit from its own lies when it used its transmission rights to ease the sham
congestion.” Mary Flood and Tom Fowler, The Fall of Enron:Ex-Trader
Pleads Guilty To Schemes; Prison, Fines Likely In California
Deals, The Houston Chronicle, Business, p.1 (Feb. 5, 2003).

[82]“What the ISPs don't tell the
public is that there are no free-riders among the content companies. They pay
handsomely for their bandwidth. In fact, they are the true bread and butter for
the major telecoms and ISPs. The reason that this "Network
Neutrality" controversy exists today is that ISPs don't want to admit that
their whole business model is flawed. They don't want to admit to their home
customers that they need to pay for metered bandwidth just like they pay for
metered water and electricity.” Code Monkey Ramblings Blog, Network Neutrality,
posted May 20, 2006;
available at: http://www.codemonkeyramblings.com/2006/05/network_neutrality.php.

[85]AT&T proposed to embrace the
FCC’s four Network Freedoms for 30 months running from the merger closing date,
and to apply network neutrality principles for its broadband Internet access
services running between subscribers and the first Internet exchange point for
a period of two years running from the merger closing date or upon the
effective date of federal legislation.AT&T expressly reserved the option not to apply network neutrality
principles for its Internet Protocol Television (“IPTV”) service and for link
beyond the first Internet Exchange point.The commitment does not provide specificity whether these conditions
exempt AT&T from a network neutrality commitment for any fiber optic
broadband link that might also offer IPTV.

[86]“Importantly, however, while the
Democrat Commissioners may have extracted concessions from AT&T, they in no
way bind future Commission action.Specifically, a minority of Commissioners cannot alter Commission precedent
or bind future Commission decisions, policies, actions, or rules.Thus, to the extent that AT&T has, as a
business matter, determined to take certain actions, they are allowed to do
so.There are certain conditions,
however, that are not self-effectuating or cannot be accomplished by AT&T
alone.To the extent Commission action
is required to effectuate these conditions as a policy going forward, we
specifically do not support those aspects of the conditions and will oppose
such policies going forward.” AT&T BellSouth Merger Approval, Joint
Statement of Chairman Kevin J. Martin and Commissioner Deborah Taylor Tate (Dec. 29, 2006); available at: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-269275A2.doc.